Manual and repetitive tasks are often still a burden that staff need to take care of, which can weigh heavily on time and resources, eating into your  budget and leaving less room for creative tasks. Some examples are data entry, forwarding information from one system to another, checking data for errors, syncing data between different platforms or with different stakeholders, and so on. 

Modern software offer more automation and integration options, but they do not always address the need for custom, specific workflows, which can be the main pain point of people that could benefit from them in startups.
The alternative of no-code visual development and low-code offers a hands-on approach to build custom integrations and process automation for both non or less-technical people as well as for more techy users or developers.

Compared to traditional development, no-code and low-code is cheaper and provides the edge of speed and customisation at a fraction of the time it would take to build and maintain software by writing code.
Instead of writing lines of code, it works much like assembling lego blocks together, only that in this case it’s on a digital canvas, and by setting up configurations for your blocks – or ‘actions’ as we like to call them. 

Visual development in Procesio

Mapping your processes

If you’ve decided you’d like to go ahead with automating workflows at your startup, it’s best to start first with mapping your processes.
For startups that have simple workflows this could be as straightforward as drawing a basic diagram, and if there are complex processes it’s necessary to have more detailed representations.

The following will help with creating an effective process map:
• determine which events occur at every step in the workflows
• write down the stakeholders involved
• use symbols
• add links and references to documents and resources

You can either draw the map on paper, use post-its, or draw in a custom software such as Visio or draw.io, depending on the level of detail you’d like to go in.
Once you have this ready, you can actually start building your automation. 

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Below are a few examples of areas where visual development with no-code can save time and money to build internal tools and automation fast:

360* Customer Support

One area which typically involves many steps that can be automated is Customer Support. 
For instance, your team could be offering support via website chat, email, phone, and social media, update accounts in a CRM or ERP, and forward leads to Hubspot.

Your support team risks missing contextual information about customers if these apps don’t communicate with each other, therefore it’s important to make sure you understand how your customers like to talk with you across different platforms.
Another key aspect is reducing customer churn rate – this is where you can be proactive and take steps to re-engage customers with messages, offers or discounts based on a set of predefined ‘churn risk’ criteria that you define. Read more about this use case here.

Sales operations

Your sales team could be using Salesforce or Hubspot to manage leads, and need a way to accurately track any other touch points that leads have had with your business, for instance have they shown interest in a certain product or service by visiting certain sections on the website? Or have they used specific parts of your app while in a trial period? These are all clues that can help your sales reps adjust their narrative to increase their chances of closing a deal.

You can set up custom integrations between the platforms and other related internal or external data sources and get a centralised view of the information in custom, real-time dashboards. 

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Find out more about this use case here.

Finance and accounting flows

As your accounting flows become more complex, you can consider streamlining order-to-cash processes. This can help you avoid late or incomplete payments, reduce errors from manual data entry, keep a consistent format, and automatically sync data with other apps.
For example, you could set up a workflow that creates or updates customer accounts and automatically sends invoices once sales reps mark opportunities as won in Hubspot. Then, feed back to the CRM the invoice ID, amount, or other information from the invoice so that your sales reps can verify it if needed.
Read more about this use case here. 

Automatic invoicing flow in Procesio

Automate logistics processes

One use case that can potentially save your team a lot of unnecessary manual work as well as prevent errors is automating order processes.
In this scenario you could set up integrations and automation to sync data between e-commerce platforms, warehouses, and logistics teams to accurately keep track of stock items and monitor the delivery process in real-time.
Read more about this use case here.

Inventory stock sync flow

These are just a few examples of workflows you can try to automate but there can be many more examples depending on your own scenario.
Building with no/low-code can be a game changer as long as you plan your operations and processes well, and know in advance which approach to combine so that you also stay flexible and leave room for scaling later on. 

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Short Q&A with Iulian Lupescu – Community Manager @ Procesio

• How did the idea behind Procesio come alive?
Our background is in software for energy and utilities through Ringhel, the first company our founder started back in 2011. A few years ago we realised we could streamline our software development by using configurable pre-built blocks, without having to hard-code everything from scratch, and so Procesio was born. The idea of Procesio also allowed us to provide a platform for our customers to build the software they needed themselves, without having to wait on us for development.

• How was/is the journey for you as a startup? What are your main struggles? How about the biggest achievements?
Last year, our main challenge was to form our base team and enroll the first users on the platform. We’re now a 20 people-strong family (and growing!), with a user base of 1.000+ users.
We’ve managed to raise 1.2M euros in funding so far, and we were thrilled to be nominated for the Future Unicorn Award a few months ago.
This year, our challenge is to bring new functionalities on the platform that will allow users more flexibility to build complex flows. At the same time, we’ll be focusing on growth by forming new strategic partnerships.

• How was the fundraising process for your startup?
Procesio is bootstrapped from Ringhel, our ‘mother company’, so this has helped us a lot with resources and experience.
We’ve enrolled in two funding rounds via Seedblink. During the first seed round in Summer 2020 we raised €556k, and in Spring 2021 we raised €610k during a bridge seed round.

• Do you use your own tool to automate your processes? How?
Perhaps the best example is building Procesio with Procesio. What I mean is that many of the standard actions you’ll find on the right-hand menu have been built using our own platform, and users can do the same in their accounts. 
Another example is a cross/upsell automation, where we’re using Ringhel’s database to automatically make new offers or proposals to clients based on their historical product/ service choices. You can read more about this implementation here.

• Why Procesio over other apps?
I would say the main differentiator is versatility. It’s a multi-faceted tool offering a wide variety of options for building custom, flexible and scalable integrations and automation. Users can connect to any external system through Call APIs, and build Custom Actions to develop own functionalities. The tool supports data processing, configuring process variables, custom data types, and visual debugging of processes. In comparison, other tools are either niched, or offer less customisation options.

• How do you see the future of automation?
Industry trends and reports predict the boom in automation with no/low-code will continue over the next decade, and we agree. Automation is a hands-on solution to save costs and time from manual, repetitive tasks, and give back time to people to focus on innovation and more relevant actions. The big plus with no/low-code is that it democratises software development, meaning that now also non or less-technical people can build apps and automation, without having to rely on developers. And this is game changer.

• What are your future plans for your company?
For the next two years, we’ll be looking carefully at learning from our users to optimise their results and experience with the tool. Also, we’ll be investing in strengthening our team as this is our biggest asset.

We’re aiming to reach a unicorn-level valuation by 2027. 

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The panel was led by Kaythlin Das and Eli Harb, representatives of the organizer entity, respectively joined by Maxence Drummond (Breega Capital), Said Haschemi (HV Capital) and Ferdinand Sigona (LocalGlobe).

Nowadays, venture capital (VC) has become a popular financing option for entrepreneurs with innovative projects. 

But securing a VC funding is not an easy task, there are several investment criterias that influence the final decision. Each firm has a complex valuation process, as the factors that come into play have a high diversity. It’s not just about the financial aspect, like balance sheets, forecasts and income statements, but there has to be taken into account also the industry in which the startup operates: analyzing the size of the market, the competitors, entry and exit barriers or even the startups’ maturity and development stage, all of these factors have an influence on the firm’s value. 

As a startup, nailing the go-to-market strategies is the key to growth, success and securing funding. VCs often focus not necessarily on the metrics, but much more importantly, on the meaning behind them. 

In the following part, we will highlight a few important KPIs and we will discuss the most common, current criterias that can make or break a VC funding deal. 

Total addressable market (TAM)

When thinking about qualifying in a good market, the very first number that people look at is the TAM, a number that shows the revenue opportunity available for a product or service. Getting this value can be quite challenging actually, and because of this, it can lead founders into making mistakes. 

The most common one is to pull the TAM form a market research report or to search for the biggest realistic and credible number that can be found regarding the startup’s market (given that the startup founders have clarity on which is that market). The reason why many people make this mistake is that big numbers are tempting, especially for VCs, as known, they like large values, because they need to believe that the amount of money being invested will be returned and the deal will bring back the highest profit possible.

As the speakers said, it’s important for founders to understand that there are better ways to make TAM estimations. For example, doing bottom up calculations will always pay off;  it shows that you are thinking and you have a great deal of understanding about whether you can match based on those numbers that you get. Moreover, this way you will also understand the numbers from the different kinds of reports, so you will know if they make sense or not.

As they have seen many startups pitch decks and have researched various markets, it’s very possible that the VCs have more clarity on the market size and will be drilling down and challenging your assumptions on this, so be prepared to explain your numbers.

KPIs which show whether the startup is doing well or not in its early stages

When giving a pitch with the aim to attract funding, it is hard to think of the perfect reporting set up or dashboard, that will show the investors that the startup has potential to grow and scale in the future. So if it comes to selecting some key KPIs, you should firstly think about those that give you a good feeling and it shows that the company is going in the right direction. 

Most of the time, these metrics will be related to the product itself: KPIs that help you validate whether the product is wanted by the market, KPIs that show if you are delivering the product at a reasonable or even profitable margin at scale, or KPIs that indicate the capability of finding and keeping customers. All of these show how sustainable your business is.

Indicators that show whether the acquisition channels are promising for a startup

The customer acquisition cost (CAC) can tell a lot about how a company is doing and this is why this metric is used also by investors to evaluate a startup. CAC, true to its definition, is the cost of convincing a customer to buy a product or service. 

Not being the only one doing that type of business or selling those products leads to every startup having its certain ways of doing customer acquisition, which can be compared not only over time (strictly related to one entity), but it can be compared as well to the existing competitors.

The investors use CAC to analyze the scalability of the startups. They can determine a company’s profitability by looking at the difference between how much money can be extracted from customers and the costs of extracting it.

Furthermore, it is essential to know in depth all the conversion rates at all stages of the sales funnel. This indicated that you mastered it and that you don’t have any issues getting qualified leads. This way investors can see if you’re doing a good job or not addressing the market and even if your customer buyer persona is built adequately and you are going after the right people. 

Conclusion

Overall, the techniques used by venture capitalists to evaluate investment opportunities differ from one to another and this is why it is hard to make a list of the steps that if followed, will increase the odds of getting funded.

What is media for equity?

This alternative business model is dedicated to startups or scale-ups that do not have a considerably high marketing budget and basically „companies trade equities to media companies in exchange for advertising space”. The media companies end up owning equities but instead of money they offer advertising, the goal being reaching the widest possible audience.

The equation is simple: media space = company shares.

(image source Media for Equity: An untapped investment model for broadcasters and startups in Central Eastern Europe, Grai Ventures)

Media for Equity investment funds can aim for shares from 5% to 15% in exchange for a certain period of media plan implementation and usually they come as venture arms of big media corporations.

The evolution of media for equity

As revolutionary as the concept might seem, paying with shares for media exposure actually originated a long time ago, in the early 2000 there were already a few investment funds that were using media to help startups grow. Firebox was one of the first startups that used the media for equity strategy right from the start and today earns millions of pounds per year.

As the trend grew nowadays there are a big variety of media funds and TV stations with corporate funds and the media sold spread from TV space to radio and outdoor advertising. A good contemporary example could be ABOUT YOU, one of the fastest growing fashion-tech startups in Europe, valued at more than 1 billion dollars, launched in 2014, started using media for equity in 2016 which brought them national exposure and pushed them to expand internationally.

The collaboration for media for equity

In order for media for equity to work it needs the active collaboration of multiple stakeholders: the startups, the venture, the media companies and media agencies.

Vinay Solanki (head of Channel 4 Ventures), Marta Zuska (head of BD at NextTECHnow), Dennis Ahrling (principal at German Media Pool) and Chris Sheldrick (co-founder & CEO at what3words) sat down together at a panel to discuss the model of media for equity, telling the story of their own experiences in this field, organised by Grai

The first concern that was raised is that oftentimes companies do not invest enough in awareness marketing out of the fear of being too expensive or hard to track, there being a certain „it may not work” culture. 

That is where media for equity steps in, since the startups do not need to invest money they don’t have or money they can potentially lose and the investors are also more interested in the highest exposure possible so that the startups can actually succeed.

There are two types of media for equity investors:

• Independent funds: they form a partnership with media companies and agencies; German Media Pool as an example
• Corporate funds: they are run by a corporation and their legal framework is easier, they are managed by the media company; Channel 4 Ventures, Ad4Ventures by Mediaset Espana, Seven Ventures etc.

There are more ways in which a media for equity company can operate: some of them do not get involved in the creative and strategic part of the campaign, startups rather work with media agencies, but they do offer feedback along the way. While others are involved in building the media campaign from the beginning.

Why use media for equity?

• The variety of startups they can work with is extremely broad, it could work for mainly anything in B2C;
• Media mix, using several channels at the same time to reach the audience – startups could choose from media partners depending on their need, from TV to billboards or radio.
• Expert media planning and adjustable advertising – the plans can be changed over time, till they achieve the goals;
• High quality media.

Why not?

• It is not a model for every kind of startups, it is more suitable for the B2C type of businesses;
• When a startup receives money for equity there is a higher flexibility in how to use them while in this case they only have media capital. 
• The model is not fully adopted in many countries.

Main takeaways

“Media for equity can be very effective: you get access or buy media, just like any other buyer, but instead of paying with cash you pay with shares and we dig around to see if that is fair and create the risk profile. We are a lot like a VC fund, we are looking for making equity returns. But we are creative, flexible but also pragmatic. Our main job and differentiator is to really find companies that can benefit from this model.” – Vinay Solanki, head of Channel 4 Ventures.

Chris Sheldrick on the other hand is one that benefited directly from the media for equity model, what3words gaining a high national exposure, they wanted to be present in the mind of every single consumer and they managed to. He says that a company gets a lot of credibility when using this type of advertising. “It’s definitely been a great experience for us”.

*The event was powered by Grai Ventures, a digital media and venture building company, that conducted a European study on the matter of media for equity.

**The full whitepaper is now available to download here. 

The concepts covered in this event were: fundraising, challenges associated with it, the main types of players, the different stages of fundraising and process associated, as well as the high-level perspective over valuation of tech intangible assets.

MAIN QUESTIONS AND LEARNING POINTS:

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Why learn about fundraising?

Fundraising, in business and like in many other things in life, is essential, being “the stepping stone to having the resources for the next development stage of the startup”.

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How does fundraising work for tech startups?

For tech startups the game has different rules. A tech startup has it’s value in intangible assets and they can not apply the traditional evaluation methods. Hence analyzing the assets of a tech startup is a tricky part.

Usually startups have some stages of valuation for each funding round. The experience of the team counts a lot, the market growth, the depth of the technological product count a lot. Investors also look at valuations in similar startups in the same industry.

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Who are the main investors and why choose one against the other?

1. INDIVIDUALS (friends and family or angel investors who usually invest their personal savings

• They are the accessible and can be the fastest deal you can get
• The investment budget is lower (usually investing at pre-seed stage)

2. PRIVATE INSTITUTIONS for pre-seed and seed stages like crowdfunding platforms, accelerators, venture capital firms or investment boutiques (usually tickets start at €100K)

• Investments are larger and can be scaled; they are resourceful and able to offer support; the ownership of the company is maintained.

• They are less accessible, being hunted by many startups.

3. PRIVATE INSTITUTIONS for later stages (Series A, B, C, D) like venture capital firms (minimum ticket €1M) or private equity firms.

• The investments are significantly bigger with aim to ensure growth exponentially
• The stakes are a lot higher and so the return of investment grows.

4. PUBLIC INSTITUTIONS like local or state grants, incubators, usually for pre-seed and seed.

• Startups maintain the decision process, the money is usually used for research purpose or some specific directions agreed with the financier
• Usually there is high competition on this type of grants

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How does the start-up financing cycle look like?

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What are the milestones and responsibilities in early investment stages?

1. Set goals for fundraising: establish your financial figures and identify potential investors.
2. Market the business: create a presentation deck, schedule presentations for investors.
3. Pitch your business and evaluate investment offers.
4. Manage the due diligence process and the documentation
5. Seal the deal: final agreement on legal terms, close the transaction.

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What about  women in tech?

Statistics say that overall, there are huge gaps in funding between women-lead startups and men-led startups. For example only 2% of the money goes to female startup founders and only 6% of the venture capital firms have women in their executive boards (Eurostat, 2018).
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Words to live by, from Andreea Saia:

• Fundraising: it’s a question of money and support.
• Dare to dream and act on it, there is a whole ecosystem ready to support you.
• Become an angel investor! Let’s offer to Female Tech founders the help we would like to receive.

“Today, in my opinion, investors and founders are not ready to outline the huge value that tech has and there are a lot of things to do here. Also there are a lot of things to do in the financing part in Romania.”

The session covered selling across the two different cultures of Romania and the United Kingdom within the context of the Geert Hofstede cultural dimensions theory. It provided the participants the basis for a cross-cultural sales model that addresses the six main marketing characteristics: trust, hierarchy, communication, decision-making, time perspective, and persuasion. 

First things first let us discuss a bit about the cultural dimensions theory before we dive into the article’s main topic to get a better understanding of what the discussion was about. 

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Geert Hofstede cultural dimensions theory

Hofstede’s theory is a framework for cross-cultural communication and it shows the effects of a society’s culture on the values of its members, and how these beliefs relate to behavior, using a structure derived from factor analysis.

His theory presents five dimensions, or value perspectives, in which national cultures differ, each of which profoundly affects the business management methods that will succeed with any specific national group. We will just list them here really quickly so you can observe how exactly this theory applies in different cultures, and then we will move on with the topic of the discussion within the session giving the fact that the webinar was wider and covered more areas:

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1.Power distance: the degree of inequality between people that a culture considers normal.

2.Individualism vs. collectivism: the cultural belief that the concerns of the individual or the concerns of the group take precedence.

3.Masculinity vs. femininity: the culturally-based preference for achievement or relationship.

4.Uncertainty avoidance: the degree to which a culture is comfortable with ambiguity.

5.Long-term vs. short-term orientation: the culturally-based tendency to value either perseverance, preparation and saving or traditions, present obligations, etc.

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Main insights from the session

Why Romania should take into account the UK and care about it?

• The ecosystem in the United Kingdom now is 120% more than it was valued in 2017. The numbers are doubled than the European ecosystem. If you are interested to know more about this exponential growth you can go through all audited figures in this report.

• Every 30 minutes, the UK launches a new business. Every one of those businesses is open to selling to, to partner with, and to collaborate with. And after Brexit, British companies, more than ever before, are much more open-minded about partnering and scaling partnerships.

• The UK overall economy report for 2020 shows substantial growth throughout the pandemic. This indicates that opportunities for UK’s business development will be open across 2021, 2022, and 2023. Subcontracting, partnering, collaborating, selling to, and engaging with the UK market is unlike anything else in Europe giving its fast development. 

• We have a lot of things to learn from the UK, in the picture below we will see that there are a few differences between the two countries when it comes to mindset, and the bubble we are in should be burst so it can open doors to new business opportunities.

What does that mean for sales communication and development?

Well, a lot of things that should be taken into account, for example how we prepare for our presentation. Do we have a presentation? How much do we talk? What do we know about the person or the company we are meeting with? What is expected of us to talk about and more? Adaptability is the key.

Bob Spence stated that during a series of meetings, the UK company might act as though it has a very flat organizational structure. While it is not a rigid structure, it has the appearance of one. It’s not really clear when the organizational hierarchy is active and when it’s inactive. This type of behavior is common during sessions, and it can lead to misunderstandings over who is making the important decisions. 

We should note this down since we might have gotten used to a different pattern. Knowing this can help us understand better the client’s needs and we won’t be stuck in our own approach, and do things differently. We can think of anecdotes, of what questions we might be asked during these types of sessions, and how to not sound evasive and like we do not know what we are talking about. 

This gif would explain best if a person in a meeting doesn’t know what is talking about: 

Also, we should spend more time learning about how the UK prospect is inclined to make a decision. Rather than perfecting how we articulate our proposition, we should spend more time studying the experience of the person we are meeting with. We can learn about the company’s financial success, and we can study the company’s culture by visiting the company’s website. 

Be adaptable with the given information and have a different approach than the one you are used with. Read more about the cultural differences that we mentioned above in the article and how these are applied in companies from the UK. 

We also need to make sure that there’s a follow-up done in a few days so the information is not forgotten. Herman Ebbinghaus theorized the forgetting curve which explains the decline of memory retention in time, and if the information given during a meeting is broad and details need to be remembered then a follow-up will help both counterparts remember the discussions there. After all, a friendly reminder of what has been said never hurts anybody. 

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To embrace better what we stated above, here is the picture that presents the five dimensions, or value perspectives, in which national cultures differ, each of which profoundly affects the business management methods that will succeed with any specific national group taking into account the UK and Romania. Look at it for a bit? What differences can you see? What are the main conclusions you can draw from this? 

In the picture above you can see that the biggest difference between the UK and Romania is individualism. This concept explains really well how success is measured in each country, and how is seen. 

A person who is motivated by personal achievements and goals whether someone who works well in a collectivist culture searches for the success of the group. What does that say about the UK? What does that say about Romania?

Why does this matter after all? 

Because we can deepen our knowledge and understanding of what is happening in the UK, and what approach we should take when having a business meeting or a project there. 

If we don’t know where to begin, we should first look at and grasp what the culture there is like. We would be happier if foreign people would understand better how we think and do things here so we should do the same. 

Logistics can shape a meeting too

Another important matter is to not forget about the logistics now that meetings are held online. As a salesperson, you might not have the same charisma that you had when these took place face to face, but there are other tools you can use to keep a discussion engaged. Your webcam can be used to your advantage, it brings you closer to the person you are talking with. 

They can put a face to the voice, and they can read a bit of your body language which is important in a meeting. Try to exercise how you talk in front of the camera, how you get your ideas across, and how much attention you give to your gestures, you might not want to scratch the back of your head as if you are not knowing something but instead use your hands to point out and create a visual for the other person. 

And remember to always have your camera open. A closed camera can show that you are not that interested and that you might be doing something else in the meantime. Humans make connections, and with today’s external context the only way you can see the human you are having the meeting with is through the webcam of their laptop. 

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Conclusion

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The webinar was just the beginning of a 3 set of webinars and articles that will deepen these concepts, and how they are applied in business development. See about the following events on Techmatch’s webpage: https://www.facebook.com/techmatcheu/events 

Overall, everybody is aware that cultural differences and approaches exist but maybe many of us didn’t look into them thoroughly and with this webinar, we caught a starting point into what this means and how we can use it to our advantage to grow and develop the startups we have. 

If you want to discover more information on this topic we recommend the following materials for learning: 

1. The article written by Bob Spence on the TechMatch blog.

2. A podcast with Bob Spence and Kasia Lanucha, Associate Intercultural Trainer and Coach at TCO International, on cross-cultural sales.

3. A video on humor and culture from Chris Smit, Intercultural management specialist, and international business expert.

4. Geert Hofstede’s research here.

This article is based on Kirsty Nathoo’s YC Startup School speech and will discuss some common mistakes and how to avoid them, also, will cover some financial tips, practices which can be used to help manage your startups finances more efficiently. 

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Common mistakes that startups make when it comes to managing the finances

1. Not knowing what numbers to look at: this means that you don’t know if your company’s health is good and what stage you are at – are you profitable or not? 

There are the 3 things that you should always know: your bank balance, the money coming in and the one going out. 

In order for you to find these numbers you don’t need any financial software, bookkeepers or any other tools; this information can be easily accessed from your online banking or the bank statements. 

By knowing these numbers, you can calculate some other useful things. You can look at burn, runway and growth rates. 

• Burn =  the rate at which a company is losing money. In other words, how you are spending your funding before generating positive cash flow from operations. Knowing this index leads you to the runway. 

• Runway = the length of time in which a company will remain solvent, assuming that they are unable to raise more money. What this means is how long do you have until you run out of all your money? You can calculate this by dividing your existing bank balance by the average burn – this will give you the number of the months left. 

• Growth rate = the rate at which the revenue is increasing. Looking at two time periods, this will be the money in month 2 minus the money in month 1, divided by money in month 1. A constant growth rate will give you the J-curve (an initial loss followed by an exponential growth)  in growth of revenue. 

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2. Not looking often enough at the before mentioned indexes: checking these numbers once a month is not enough, you should be looking at it at least every week in order for you to be able to make a change if something goes wrong. When someone asks, you should know your numbers exactly.

3. Under-representing expenses: at the beginning the majority of the people assumes that the expenses are going to be constant, but in reality, this is highly unlikely. Over time the expenses will start increasing and you should be able to understand what is going to happen, which expenses are going to increase. 

4. Out-sourcing responsibility: even though the bookkeeper is preparing the finances for the company, the responsibility is still everybody’s in the company. Especially the CEO, but also the founders, everybody should know what the numbers are, because an external person, the bookkeeper, doesn’t know the business like you do. 

5. Scaling too quickly: this thing is really easy to do; you hire too quickly, because you’re under pressure. You should be aware that hiring employees cost more than just their salary and every hire should be an investment into the business, so you should be making sure that you’re getting a return on this investment. Keep in mind: some of the best startups do more with less. 

Also, scaling before you get product market fit is another dangerous thing that people fall into easily. At the point where you’re still figuring out what your product is and you’re trying to find product market fit, you should be spending as little as possible, and then that will give you the runway to have time to figure out what it is that you should be building in order to have success. 

More employees will not help you to get to product market fit. It will not help you get there faster, it will not help you get there more efficiently.

6. Letting runaway get too low before fundraising: this is the one from which there is no coming back from. If you let your runway get too low before raising, you’re going to have problems raising your money. 

The first thing is that you should always assume: you will never raise any more money. Always assume that the previous money that you raised will be your last, and that you should be aiming to get to profitability on that money.

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4 financial tips

• Cash flow management is key – you need to know where every single dollar is coming from and where every single dollar is going.

• Track and monitor all spending –  you can use accounting software to remain organized.

• Limit your fixed expenses in the beginning – keeping your expenses low can be the key to longevity.

• Establish financial goals – you need to break financial goals down into reachable and measurable ones. Monthly, weekly revenue goals allow you to stay on track and make the adjustments necessary for constant growth.

That being said, many companies die because they run out of money. You can prevent this just by looking at a certain number of things: knowing your cash balance in your runway, understanding how your expenses are going to increase, understanding that the ratio of revenue to employees is a better metric than just the number of employees, and having a plan to get to profitability because you should assume you’re not going to raise any more money, these are some small steps that can save your startup’s life. 

Anu Hariharan (Partner at Y Combinator’s Continuity Fund) gives us an insight through her talk into which metrics we should choose to track based on our business model.

How do we think about what metrics to track?

This depends on which business model your startup fits in!

A business model is a company’s plan for making a profit. It identifies the products or services the business will sell, the target market it has identified, and the expenses it anticipates. On one hand, this definition gives us a general perspective of what a business model is, on the other hand it is a known fact that there isn’t one model that fits all, and that there are plenty more out there.

Anu Hariharan’s talk for Startup School by Y Combinator comes in and gives us some clearance about 9 business models, and what metrics they should have and that are wanted by investors. In this talk we understand how important it is to have measurable and helpful metrics for our company, and to not get lost in other ineffective details. She points out the common mistakes that are made at every business model as a friendly reminder that if you are not paying attention to your metrics you can lose valuable users.

Enterprise

The first model discussed was the enterprise type which is a company that sells software or services to a large enterprise. She further explains that when you work with enterprises you work in terms of contracts, and that should be your main focus from which you can draw out the needed metrics. What an enterprise company should track is:

1. Number of bookings which actually means the value of customer contracts the company has.
2. Total customers — total number of unique contracted customers in a specific day.
3. Revenue which is recognized when the service is actually provided over the life of the agreement.

But she also advises startup founders with an enterprise business model to be careful about the common mistakes founders like them are usually doing, which are:

The first mistake is confusing bookings with revenues and having the contract written down when working with enterprises. Startups signed contracts but they haven’t delivered anything. The contract hasn’t even kicked in but they’re already reporting it as revenue and that’s not entirely true because you haven’t delivered any service, and in conclusion you have no revenue.

The second common mistake which is probably more relevant at the stage that you’re in is not having a contract signed with the company you are working with, and for you the revenue and the contract is more important than it is for them.

SaaS (Software as a Service)

It is used by a company that sells subscription-based licenses for a cloud-hosted software solution. You as a company charge your user monthly for a software you provide.

Examples of SaaS companies are Salesforce, Mailchimp, Slack, Shopify — all of them requiring a monthly subscription from the user in order to use their platform.

For a SaaS company there are also a few key metrics to track, and that will help the founders grow their company even more and have investments in it. The most important metrics are:

1. Monthly Recurring Revenue (MRR) — which basically says the product should be liked by people and that you should have users that will continue to pay your subscription monthly.
2. Annual Recurring Revenue (ARR) is a good metric to track in comparison with MRR, as it shows the pace of revenue, as compared with just the absolute revenue number, moreover it shows you an annual situation of your company when it comes to subscribers.
3. Gross Monthly Recurring Revenue Churn (Gross MRR Churn) — this metric is important especially when you’re early stage and you only have a few customers, losing even one or two has a real impact on your revenues, so this is why you should be really careful with how you keep your subscribers.
4. Paid Cost to Acquire Customers (Paid CAC) — if possible you should acquire users organically, but eventually you will experiment with paying (for example in advertising) to acquire users once you reach a certain stage where you need to grow more.

Of course, there are SaaS company founders that also make a few mistakes when dealing with these metrics:

First mistake is that they don’t use ARR and ARRR interchangeably. In this case, founders should keep into account because if your customers are not committing to 12 months of payment, you don’t have a recurring revenue business. This leads to confusion — if you start calling it ARR, everyone thinks, “Oh it’s repeat business.” It’s not, because you have to go back and acquire them each month, which inquires about a cost that is either time or money that you might not have.

Subscription

A business model that is similar to a SaaS model but it usually has a lower revenue per customer. Examples of companies are Linkedin, Netflix and any other company that is usually targeting B2C, and that offers a cheaper monthly subscription affordable for every customer. The metrics are pretty much the same here as they are at a SaaS model.

1. MRR — users who would pay a monthly amount of money to receive your product
2. CMGR — because usually on a subscription based company the subscription revenue is smaller so you need to take into consideration this metric as well.
3. MRR Churn — just like at a SaaS company this metric is important when you’re early stage and you only have a few customers, losing even one or two has a real impact on your revenues.
4. Paid CAC — if possible you should acquire users organically, but eventually you will experiment with paying (for example in advertising) to acquire users once you reach a certain stage where you need to grow more.

Transactional

The type of business model that charges a fee for each transaction. Examples of companies here would be: Paypal and Stripe — since these companies do use a fee from the user every time they use the product. The most important metrics here are:

1. Gross Transaction Volume (GTV) — why is this metric so important? Because if you have 30 customers that are going through your company processing you will have a large sum of money in total transactions, that’s GTV. But the volume of payments that goes through your platform isn’t revenue for your company, the real revenue is the second metric you should take into consideration which is
2. Net Revenue — money that you take out of the transactions flowing through your platform, those that go into the company’s bank account.
3. User Retention on a Monthly Basis — due to the way of functioning of transactional businesses, you will most likely have a large volume of customers and because the customer has a high probability in gaining a lot of money, there should be no reason they stop using your platform, unless you have other problems with it that should be fixed as soon as possible.

Of course a transactional company can make mistakes as well, after all if we don’t make any how will we realise that we can grow? The most common mistake for a transactional business model is actually confusing GTV with Net Revenue and only counting the cash that enters your account, without thinking how many transactions are made through the platform.

Marketplace

A type of company that acts as an intermediary between two consumers, connecting them to buy or sell a good or service. Examples of companies here include Airbnb, Ebay or Booking.com. Marketplaces connect sellers and buyers to exchange a good or service. Key Metrics that you need to track here according to Anu Hariharan are:

1. Gross Merchandise Value (GMV) — for example if the user sets a price for a good he wants to rent or sell, from that price a percentage will go to the marketplace company.
2. Net Revenue is the percentage of the GMV that a marketplace company gets in their bank account.
3. Net Revenue Compound Monthly Growth Rate (Net Revenue CMGR). Since Marketplaces are typically B2C companies the volume of users matters that’s why you should always check User Retention because a consumer that only uses the platform once and doesn’t come back won’t help your revenue, and your company grow.

Common mistake for a marketplace business model is blending paid user acquisition with organic user acquisition. If you don’t separate out the two metrics, you won’t have a good sense if your growth will be sustainable.

E-commerce

This is a company that sells physical goods online. Generally they manufacture and inventory those goods — a good example for this type of business model is Amazon. In e-commerce, you may make the products, but you can source the products as well — Amazon does that too with some of their products on the platform. What you have to remember that users will come back for your brand, and the services that you offer.

Key Metrics to track here include:

1. Monthly Revenue — since there’s no recurring purchases you need to track the monthly revenue.
2. Revenue Compounded Monthly Growth Rate (Revenue CMGR) -measures the return on an investment over a certain period of time, and the revenue that comes from it.
3. Gross Margin is calculated by gross profit in a given month and divided in total revenue in the same month

The question you need to ask yourself if you are an e-commerce company is: How much money are you making for each thing you sell? With a business model like this you need to make sure that you are getting paid from every transaction that takes place on your platform.

Advertising

An advertising company is one that offers a free service, and derives revenue from selling advertisements placed inside the free service. Examples of companies that work on that model are Snapchat, Twitter, Reddit — basically platforms that are used by a high number of users, they are the most important part of your company — especially if you are early stage. Key Metrics to track if you have an advertising business model:

1. Daily Active Users (DAU) — this is the number of unique active users in a 24 hour day, averaged over a period of time — the users who do not come back to your platform are not helping. You need to know how to keep them there.
2. Monthly Active Users (MAU) is the number of unique active users in a one month period, how many kept using your platform after day one.
3. Percentage logged in — users with a registered account that log in and log out over the same 30 day period.

A common mistake for an advertising company is how they calculate their retention when it comes to the users they have. Some founders even forget to take that into consideration at some point and they end up regretting it.

Hardware

And the last business model that Anu Hariharan talks about is hardware which is a company that sells physical devices to consumers. Examples of such companies are Fitbit, GoPro, Xiaomi. This type of business model is really similar to the e-commerce one and that is why all the key metrics are the same.

Key Metrics to track if you are a hardware company:

1. Monthly Revenue — there’s no recurring purchases, so simply track revenue per month.
2. Revenue Compound Monthly Growth Rate (Revenue CMGR) — since we are talking about users and tracking volume, and because averages aren’t the whole picture for this type of business you should track compounded.
3. Gross Margin where you need to make sure you’re making money on each transaction.
4. Paid CAC which is simply the average money you spend in obtaining a customer. Whatever business model your company has you should always take this matter into consideration so you can have a ROI (Return of Investment) from every action you do.

Overall, metrics are here to give you a clear direction for your business, they structure the direction in which you should be heading as a company. It is up to you to decide which metric best fits your company and how you should use it for growth.

This article will reflect on some common mistakes, it will introduce some useful principles and also it will provide some tips that will help you in the process of figuring out the right price for your product. The article is based on Kevin Hale’s YC Startup School speech.

Most common mistakes that startups make when it comes to pricing

• Prices are too low: there is a tendency to consistently undercharge.
• Underestimating the costs: this will lead to several problems — mostly, the margins won’t be enough to cover the acquisitions.
• Not understanding the value offered or not being able to convince the customers about the value that their product offers will lead to the same result — they won’t charge the right price.
• Focusing on the wrong customers can happen when mainstream customers are in the company’s spotlight and not the early adopters (which are much more in need for the product).

3 key things that you should consider before putting a price tag on a product:

1. Cost of production: the first step of any pricing effort is getting all costs included in your pricing. Beside the direct, manufacturing/developing costs to make your product, you must also integrate the indirect costs, such as: office rent, employee salaries, marketing budget, etc.
2. Scarcity: one of the most fundamental rules of pricing boils down to basic economics: limited supply drives up your price. Many B2B services are not scarce. They have standard costs, high competition keeps prices fairly stable. Same goes for a lot of B2C products too.
3. Estimate realistically: before you sink money into creating a new product, make sure you are being realistic about how much you’ll be able to charge in the long run and then you can work backwards to calculate how much you can afford to invest and ultimately to price.
4. Perceived value: usually, companies tend to fixate on the gap between manufacturing cost and charged price. But you should also focus on the gap between your price and how much value customers think that the product/service delivers, a concept known as the perceived value.

Price Thermometering

When you are thinking about pricing you should use a concept called the price thermometer. There are two factors beside the price that play a major role in the process of pricing: cost and value. The interaction and relationship between these items highly affects how the growth happens inside the company.

The gap between price and cost is the margin, the incentive to sell. The bigger that gap is, the more you are driven to want to push your product to the customers.

On the other hand, the gap between price and value, is the incentive to buy. In this case, the larger that gap is, the easier it is to have customers that want to sign up or use a product.

By using this principle, there are two ways to figure out price: you either start with the cost — if you know what it is and you figure out where your price is based on that. This technique is called cost plus.

The other way to do it is to figure out what is the value of your company or product/service and then you figure out your price. This is called value-based pricing.

In startups and in almost all businesses, everyone is striving for value-based pricing, because it allows you to charge a whole lot more and also, it gives you the chance to manipulate the incentive to buy.

The rule of 10 / 5 / 20

This is a three-step formula for deciding the perfect pricing level that maximizes the profits, keeps customers happy, and creates a forcing function for the company to focus on creating more value.

Briefly, here are the steps:

1. The perceived value by a customer should be 10X the price.
2. Raise the price by 5%. Once you have a price, you should practice raising it, until:
3. You are losing 20% of your customers.

More advice

• Put more effort when it comes to pricing: you have to understand that pricing is a function of a product’s value.
• Go after early adopters because they are the customers who try a product out and then influence their network of friends/family to buy it.
• Figuring out what goes through a customer’s mind when he/she first sees your product can help you set a price; this you can do easily by observing and talking with some of them while they look at your website or product.
• Cost, price, value. Make sure you got these concepts right and you understand how they fit in your startup.

Startups are challenged by many things, but pricing is one area where they can have some power to shape their own destinies, if they have a thoughtful strategy built on valuable insights, practical knowledge and leadership.

Make the effort as soon as possible to understand the components to be able to work on building a strong pricing strategy.

We were focusing on the idea validation, business cases, revenue model but often we forgot to ask ourselves more important questions.

As an entrepreneur, there are many specific questions that you should ask yourself in order to grow not only oneself, but also your business idea. Sometimes, you are one question away from changing your life, you just need to find the right one to address it to yourself. 

Francis Bacon, an English philosopher, once said “A prudent question is one-half of wisdom.” Meaning, that the right question asked even without the answer is already half the insight. Moreover, from Napoleon’s point of view, the words HOW and WHY cannot be used too often, because knowledge comes from inquisitiveness.

Below you can see some personal questions that I’d have very much appreciated to be asked during those moments as these would have probably saved time and energy for me and the team and might have guided us to even drop some ideas aside. 

At first we will focus on your relationship with this new startup and the why and then we’ll move on to various aspects regarding your potential role in it.

1. What is your vision on the project? 

In order to clarify and understand what your plan is, you need to have a clear vision. You should develop and write down your personal and professional desires with medium term and long term goals. You don’t need to build this as a plan, because in time it will change as your personal and professional circumstances change. The purpose of this is to have an understanding of what you want to accomplish and how you will achieve it. 

This vision needs to inspire you, it’s not just about the business opportunity but it’s also about the impact you will have in the world. If you cannot find one, sooner or later in the startup life, when the challenges will be quite big you will probably give up on the project/startup. The vision is the one that guides in the darkest times. 

As soon as you know your vision, people around you will start noticing you’re doing things differently. It also means that you kind of know the level of sacrifice, the level of detail, the kind of team mates you need, all of these things have to be tight to the vision that you have.  

2. What is your motivation for doing this particular project/startup?

Being an entrepreneur and not an employee is a lot more harder and challenging than you would think. This is why, when starting a new project/business and along the way you are in need of a great amount of motivation, which will help you go through every obstacle that will come your way in time. Also, you have to find a way to self-motivate yourself, in order for you to remain inspired, disciplined and organized.

It’s also important to reflect on how much is the ego driving your actions towards this startup. Ego is not necessarily a bad thing, but it can be used to push the startup forward. The better you understand your motivation and motives, the better your performance can become.

3. How much do you want to scale your business?

A lot of people say: “I don’t know. I guess I will find out when I go through it. We will see.” But you should be more clear about your ambition. In business you should know how big you want to build your company. You want to be a local impactful startup in a city where everybody knows you or you want your startup to be a big player in a region or globally. You don’t need to follow the dogma of going global, but to understand your own ambition for scaling.

4. What values do you look to have in the startup team? How do you want to have the team culture?

“Culture eats strategy for breakfast” is a famous quote from legendary management consultant and writer Peter Drucker.

Beyond how the startup will evolve in connection with customers and the outside world, the team will be the engine for all these and the startup will be an image of the values and culture you instill in the team. So, make a list of values that you want to have them integrated in your culture; make conscious choices about them and see if they are reflected in the work you do and ask yourself if you are walking that path desired.

5. What are your weaknesses?

You may be great in operational, coding, design, sales, but for sure you have a lot of areas where you are not good. The reason why you should know as soon as possible what your weak areas, is to hire people who are strong in those areas. This way, your weakness will no longer be highlighted, because you hired the right people who were better than you in those areas.

6. Where is my time being wasted?

An important question to ask yourself and reflect on it as you should put your time in areas with the biggest return, not areas which aren’t worth it, although you like them. The point is to prioritize based on what you can do and what you know; to find out the areas in which you are most effective and gather other people around to complement.

7. What usually blocks you from starting or doing things?

We all procrastinate various things, consciously sometimes, subconsciously most of the time. Usually the blockages come from a psychological trauma or negative association about that particular situation. Our patterns kick in and we easily can slide into not acting in the right way. 

The entrepreneurial journey is quite often an inwards journey of self-understanding and growing awareness of oneself. If you’re being honest with yourself, you’ll see that root cause in any failure is something that is traced back to one of your patterns and behaviours as founder. This doesn’t mean you should be harsh with yourself, but to understand what happens, deconstruct the pattern of acting and to change it.

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By asking yourself these questions and practicing an ongoing reflection, you can remain focused on your goals and long term vision. Whenever you want to step back to get an overall view on your progress, take a few minutes to run through the aforementioned questions. Doing so will reconfirm your motivation and will give you new ways to implement in the future. 

North Star is the brightest star in Ursa Minor constellation, and it is centered in the north celestial pole. Moreover, the entire northern sky moves around it, and it sometimes shows lost people where the north is, and how they can make it home safe. And just like it’s natural counterpart the North Star Metric shows people the way to their idea, and the core of their product, and the value that it should bring to consumers.

What and why is North Star Metric so important?

A North Star Metric is a concept that appeared a few years ago in Silicon Valley, and that captures the core value your product delivers to customers.

Think of the North Star Metric as a driver for your company, and that gives the “aha” moment for a buyer, client, customer or user.

Let’s start with a simple example between two well known social media platforms: Facebook and Myspace. As you are aware already Facebook is the biggest social network worldwide to this day, while Myspace got lost through the years. Now, of course there are many reasons why companies succeed or fail, but one of the reasons can be NSM and the way you found the core of your product. Growth advisor and investor, Buckley Barlow, believes a major reason, Myspace failed and Facebook succeeded, has to do with the NSM they were focused on.

For example, Myspace’s NSM was Registered Users, whereas Facebook focused on Monthly Active Users. This different approach led Facebook to have a growth mindset, and optimize and improve what is needed, meanwhile Myspace failed because Registered Users only showed who has signed up, and unfortunately it didn’t show if the users are continuing to use the platform. And therefore they couldn’t see who chooses to use and see the value of their product, and users who don’t get value from a product will stop using it. By tracking Monthly Active Users, Facebook could oversee changes in user numbers and see which users found value from using the platform.

That is why discovering your company’s North Star Metric is important because it is the key to long-term sustainable growth for your business. Finding this only metric can help you optimize the processes of your product and understand your customers better. To sum it up, it gives clarity and alignment on what it needs optimizing, it can communicate the impact and progress to the entire company, and it holds the product accountable towards an outcome.

How do you actually find it?

In order to identify the needed NSM, you need to understand the value your users are getting from your product and how they get it.

Shortly said, NSM should reflect:

1. the core value of your product.
2. activity and user engagement level
3. it should indicate if your company is heading into the right direction or not
4. how easy it is communicated around the company’s teams
5. a metric that will reflect the focus of the entire company.

If we talk about daily usage, the NSM is broken down in more metric that makes all the teams take ownership and be accountable towards the bigger goal. Many of these metrics need to be structured and achievable in order for them to contribute to the end result. So after you find the North Star Metric fit for your product plan for the small steps is needed as well.

Also consider the downsides of every metric can bring. “Think through some scenarios where growing the metric could lead the team to behave in ways that are against the long term interest of the business.” — Sean Ellis mentioned in one of his Medium articles on Finding your North Star Metric. (link to the article)

He also gives an example about how the NSM you chose can lead you in the wrong direction. For example, when talking about “average monthly revenue per customer” you have to think that the way to grow this number would be to eliminate all customers that have a relatively low value, even if they are profitable customers. This would likely reduce your overall customer and revenue growth rate but when taking into account this NSM you will most likely have to do that.

A different suggestion is to keep your NSM simple so that it can be understood by everybody that works or will work for that, because if it something more complex people will be confused by it and they will not know what to focus on.

Finally, the North Star Metric can become a powerful metric if the team associates it to the overall company’s mission. As mentioned before, Facebook does an excellent job of connecting their NSM, which is Daily Active Users, to their mission of “bringing the world closer together” , and they have been doing a good job so far.

This article is inspired based on the keynote delivered by Sean Ellis at the How to Web conference in Bucharest that took place at the end of October.

Most successful startups have NSM, a “single metric that best captures the core value that your product delivers to customers.” That metric can take a lot of forms, but the idea is that it should be specific to your company and business. Here are a few examples of companies that use NSM as a guide for all of their operational tasks.

• Two-sided platforms like Airbnb and Uber use a metric that is more product focused, since it has to add value to two sides of the platform (supply and demand). Airbnb has Booked Nights, meanwhile Uber has Finished Rides per Week for users and drivers.
• Social media, like Facebook, LinkedIn and Slack are more focused on the number of active users per month, since they make revenue based on the attention that goes to their ads that can’t be combined in a specific action other than ‘being active’. Facebook has Monthly Active Users, LinkedIn — Monthly Active Users, Slack — Daily Active Users
• Ecommerce companies like Amazon and many others are focused on helping people find what they’re looking for. Therefore number of purchases is their North Star Metric. Amazon — Number of Purchases per Month.